|
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d) of
The
Securities Exchange Act of 1934
Date of
report (Date of earliest event reported) November 1, 2011
Radian Group Inc.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware |
1-11356 |
23-2691170 |
(State or Other Jurisdiction |
(Commission |
(IRS Employer |
1601 Market Street, Philadelphia, Pennsylvania |
19103 |
(Address of Principal Executive Offices) |
(Zip Code) |
(215) 231 - 1000
(Registrant’s
Telephone Number, Including Area Code)
(Former
Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Item 2.02. Results of Operations and Financial Condition.
On November 1, 2011, Radian Group Inc. issued a news release announcing its financial results for the quarter ended September 30, 2011. A copy of this news release is furnished as Exhibit 99.1 to this report.
The information included in, or furnished with, this report shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act"), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
99.1* |
Radian Group Inc. News Release dated November 1, 2011. |
_____________________
* Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
RADIAN GROUP INC. |
|||||
(Registrant) | |||||
Date: |
November 1, 2011 |
By: |
/s/ C. Robert Quint |
||
C. Robert Quint |
|||||
Chief Financial Officer |
EXHIBIT INDEX
Exhibit |
Description |
|
99.1 |
Radian Group Inc. News Release dated November 1, 2011. |
* Furnished herewith.
Exhibit 99.1
Radian Reports Third Quarter 2011 Financial Results
– Diluted net income per share of $1.37 includes significant impact of fair value gains –
– Mortgage Insurance Segment reports pre-tax loss of $78.2 million –
– New mortgage insurance written grows to $4.1 billion in the quarter –
– Risk-to-capital ratio of 21.4:1; approximately $600 million of available holding company liquidity –
PHILADELPHIA--(BUSINESS WIRE)--November 1, 2011--Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended September 30, 2011, of $183.6 million, or $1.37 per diluted share, which included combined net gains from the change in fair value of derivatives and other financial instruments of $206.6 million. This compares to net income of $112.2 million, or $0.84 per diluted share, for the prior-year quarter, which included combined net gains from the change in fair value of derivatives and other financial instruments of $234.7 million. Book value per share at September 30, 2011, was $9.67.
“Our top priorities at Radian are to grow our mortgage insurance business and to effectively manage our legacy risk,” said Chief Executive Officer S.A. Ibrahim. “We are encouraged by our ability to significantly increase Radian’s volume of profitable new business while maintaining our sharp focus on loss mitigation.”
Ibrahim added, “We will continue to leverage our competitive strength, customer relationships and financial flexibility to best manage through this prolonged uncertainty.”
THIRD QUARTER HIGHLIGHTS
-- | Excluding gains and losses on derivatives and other financial instruments, the financial guaranty segment was again profitable on an operating basis in the third quarter of 2011. | ||||||||
-- |
As of September 30, 2011, Radian Asset had approximately $1.0 billion in statutory surplus and an additional $1.1 billion in claims-paying resources. |
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-- | Net par outstanding for Radian Asset was $71.9 billion as of September 30, 2011, compared to $74.7 billion as of June 30, 2011, and $79.9 billion as of September 30, 2010. | ||||||||
-- | Radian Asset is expected to pay an ordinary dividend of approximately $50 million to Radian Guaranty in 2012. | ||||||||
CONFERENCE CALL
Radian will discuss each of these items in its conference call today, Tuesday, November 1, 2011, at 10:00 a.m. Eastern time. The conference call will be broadcast live over the Internet at http://www.radian.biz/page?name=Webcasts or at www.radian.biz. The call may also be accessed by dialing 800-288-8960 inside the U.S., or 612-332-0107 for international callers, using passcode 221288 or by referencing Radian.
A replay of the webcast will be available on the Radian website approximately two hours after the live broadcast ends for a period of one year. A replay of the conference call will be available approximately two and a half hours after the call ends for a period of two weeks, using the following dial-in numbers and passcode: 800-475-6701 inside the U.S., or 320-365-3844 for international callers, passcode 221288.
In addition to the information provided in the company's earnings news release, other statistical and financial information, which is expected to be referred to during the conference call, will be available on Radian's website under Investors >Quarterly Results, or by clicking on http://www.radian.biz/page?name=QuarterlyResults.
About Radian
Radian Group Inc. (NYSE: RDN), headquartered in Philadelphia, provides private mortgage insurance and related risk mitigation products and services to mortgage lenders nationwide through its principal operating subsidiary, Radian Guaranty Inc. These services help promote and preserve homeownership opportunities for homebuyers, while protecting lenders from default-related losses on residential first mortgages and facilitating the sale of low-downpayment mortgages in the secondary market. Additional information may be found at www.radian.biz.
Financial Results and Supplemental Information Contents (Unaudited)
For trend information on all schedules, refer to Radian’s quarterly financial statistics at http://www.radian.biz/page?name=FinancialReportsCorporate.
Exhibit A: | Condensed Consolidated Statements of Income | |
Exhibit B: | Condensed Consolidated Balance Sheets | |
Exhibit C: | Segment Information Quarter Ended September 30, 2011 | |
Exhibit D: | Segment Information Quarter Ended September 30, 2010 | |
Exhibit E: | Segment Information Nine Months Ended September 30, 2011 | |
Exhibit F: | Segment Information Nine Months Ended September 30, 2010 | |
Exhibit G: | Financial Guaranty Supplemental Information | |
Exhibit H: | Financial Guaranty Supplemental Information | |
Exhibit I: | Mortgage Insurance Supplemental Information | |
New Insurance Written | ||
Exhibit J: | Mortgage Insurance Supplemental Information | |
Insurance in Force and Risk in Force | ||
Exhibit K: | Mortgage Insurance Supplemental Information | |
Risk in Force by LTV and Policy Year and Other Risk in Force | ||
Exhibit L: | Mortgage Insurance Supplemental Information | |
Claims, Reserves and Reserve Per Default | ||
Exhibit M: | Mortgage Insurance Supplemental Information | |
Default Statistics | ||
Exhibit N: | Mortgage Insurance Supplemental Information | |
Net Premiums Written and Earned, Captives and Persistency | ||
Exhibit O: | Mortgage Insurance Supplemental Information | |
Modified Pool | ||
Radian Group Inc. and Subsidiaries |
||||||||||||||||
Condensed Consolidated Statements of Income |
||||||||||||||||
Exhibit A | ||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||
September 30 | September 30 | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands, except per-share data) | ||||||||||||||||
Revenues: | ||||||||||||||||
Net premiums written - insurance | $ | 178,287 | $ | 174,807 | $ | 513,814 | $ | 490,209 | ||||||||
Net premiums earned - insurance | $ | 179,655 | $ | 203,937 | $ | 571,612 | $ | 605,651 | ||||||||
Net investment income | 38,763 | 46,554 | 124,826 | 140,531 | ||||||||||||
Net gains on investments | 81,640 | 94,258 | 163,311 | 209,468 | ||||||||||||
Net impairment losses recognized in earnings | (20 | ) | (34 | ) | (31 | ) | (90 | ) | ||||||||
Change in fair value of derivative instruments | 126,008 | 229,783 | 558,626 | (372,777 | ) | |||||||||||
Net gains (losses) on other financial instruments | 80,602 | 4,882 | 160,900 | (159,882 | ) | |||||||||||
Gain on sale of affiliate | - | - | - | 34,815 | ||||||||||||
Other income | 1,404 | 1,951 | 4,048 | 5,654 | ||||||||||||
Total revenues | 508,052 | 581,331 | 1,583,292 | 463,370 | ||||||||||||
Expenses: | ||||||||||||||||
Provision for losses | 249,598 | 344,389 | 940,537 | 1,323,435 | ||||||||||||
Change in reserve for premium deficiency | (1,942 | ) | 8,628 | (6,427 | ) | 43 | ||||||||||
Policy acquisition costs | 11,449 | 11,054 | 39,967 | 42,719 | ||||||||||||
Other operating expenses | 45,240 | 43,052 | 137,413 | 143,273 | ||||||||||||
Interest expense | 14,094 | 9,502 | 47,197 | 28,551 | ||||||||||||
Total expenses | 318,439 | 416,625 | 1,158,687 | 1,538,021 | ||||||||||||
Equity in net income of affiliates | - | - | 65 | 14,668 | ||||||||||||
Pretax income (loss) | 189,613 | 164,706 | 424,670 | (1,059,983 | ) | |||||||||||
Income tax provision (benefit) | 6,045 | 52,521 | 981 | (386,733 | ) | |||||||||||
Net income (loss) | $ | 183,568 | $ | 112,185 | $ | 423,689 | $ | (673,250 | ) | |||||||
Diluted net income (loss) per share (1) | $ | 1.37 | $ | 0.84 | $ | 3.16 | $ | (6.20 | ) | |||||||
(1) Weighted average shares outstanding (In thousands) |
||||||||||||||||
Weighted average common shares outstanding | 132,364 | 132,324 | 132,366 | 108,608 | ||||||||||||
Increase in weighted average shares-common stock equivalents-diluted basis | 1,149 | 1,196 | 1,501 | - | ||||||||||||
Weighted average shares outstanding | 133,513 | 133,520 | 133,867 | 108,608 | ||||||||||||
For Trend Information, refer to our Quarterly Financial Statistics on Radian's (RDN) website. |
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Radian Group Inc. and Subsidiaries |
||||||||||||
Condensed Consolidated Balance Sheets |
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Exhibit B | ||||||||||||
September 30 | December 31 | September 30 | ||||||||||
(In thousands, except per-share data) | 2011 | 2010 | 2010 | |||||||||
Assets: | ||||||||||||
Cash and investments | $ | 5,936,586 | $ | 6,680,630 | $ | 6,438,904 | ||||||
Deferred policy acquisition costs | 138,962 | 148,326 | 146,475 | |||||||||
Deferred income taxes, net | 19,244 | 27,531 | 728,230 | |||||||||
Reinsurance recoverables | 166,483 | 244,894 | 586,370 | |||||||||
Derivative assets | 20,315 | 26,212 | 26,995 | |||||||||
Receivable for securities sold | 504,584 | 160 | 134,539 | |||||||||
Other assets | 460,111 | 493,134 | 490,084 | |||||||||
Total assets | $ | 7,246,285 | $ | 7,620,887 | $ | 8,551,597 | ||||||
Liabilities and stockholders' equity: | ||||||||||||
Unearned premiums | $ | 628,400 | $ | 686,364 | $ | 707,265 | ||||||
Reserve for losses and loss adjustment expenses | 3,260,556 | 3,596,735 | 3,592,973 | |||||||||
Reserve for premium deficiency | 4,309 | 10,736 | 25,399 | |||||||||
Long-term debt | 814,901 | 964,788 | 664,901 | |||||||||
VIE debt | 273,379 | 520,114 | 496,293 | |||||||||
Derivative liabilities | 188,921 | 723,579 | 530,688 | |||||||||
Payable for securities purchased | 532,451 | 9,112 | 282,477 | |||||||||
Other liabilities | 254,932 | 249,679 | 319,981 | |||||||||
Total liabilities | 5,957,849 | 6,761,107 | 6,619,977 | |||||||||
Common stock | 151 | 150 | 150 | |||||||||
Additional paid-in capital | 1,074,201 | 1,071,080 | 1,004,079 | |||||||||
Retained earnings (deficit) | 218,095 | (204,926 | ) | 928,025 | ||||||||
Accumulated other comprehensive loss | (4,011 | ) | (6,524 | ) | (634 | ) | ||||||
Total common stockholders' equity | 1,288,436 | 859,780 | 1,931,620 | |||||||||
Total liabilities and stockholders' equity | $ | 7,246,285 | $ | 7,620,887 | $ | 8,551,597 | ||||||
Book value per share | $ | 9.67 | $ | 6.46 | $ | 14.53 | ||||||
Radian Group Inc. and Subsidiaries |
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Segment Information |
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Quarter Ended September 30, 2011 |
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Exhibit C | ||||||||||||
Mortgage | Financial | |||||||||||
(In thousands) | Insurance | Guaranty | Total | |||||||||
Revenues: | ||||||||||||
Net premiums written - insurance | $ | 178,215 | $ | 72 | $ | 178,287 | ||||||
Net premiums earned - insurance | $ | 163,436 | $ | 16,219 | $ | 179,655 | ||||||
Net investment income | 21,642 | 17,121 | 38,763 | |||||||||
Net gains on investments | 53,263 | 28,377 | 81,640 | |||||||||
Net impairment losses recognized in earnings | (20 | ) | - | (20 | ) | |||||||
Change in fair value of derivative instruments | 200 | 125,808 | 126,008 | |||||||||
Net gains on other financial instruments | 2,486 | 78,116 | 80,602 | |||||||||
Other income | 1,357 | 47 | 1,404 | |||||||||
Total revenues | 242,364 | 265,688 | 508,052 | |||||||||
Expenses: | ||||||||||||
Provision for losses | 276,599 | (27,001 | ) | 249,598 | ||||||||
Change in reserve for premium deficiency | (1,942 | ) | - | (1,942 | ) | |||||||
Policy acquisition costs | 7,834 | 3,615 | 11,449 | |||||||||
Other operating expenses | 36,082 | 9,158 | 45,240 | |||||||||
Interest expense | 2,015 | 12,079 | 14,094 | |||||||||
Total expenses | 320,588 | (2,149 | ) | 318,439 | ||||||||
Equity in net income of affiliates | - | - | - | |||||||||
Pretax income (loss) | (78,224 | ) | 267,837 | 189,613 | ||||||||
Income tax provision (benefit) | (36,033 | ) | 42,078 | 6,045 | ||||||||
Net income (loss) | $ | (42,191 | ) | $ | 225,759 | $ | 183,568 | |||||
Cash and investments | $ | 3,176,860 | $ | 2,759,726 | $ | 5,936,586 | ||||||
Deferred policy acquisition costs | 47,863 | 91,099 | 138,962 | |||||||||
Total assets | 3,731,978 | 3,514,307 | 7,246,285 | |||||||||
Unearned premiums | 206,477 | 421,923 | 628,400 | |||||||||
Reserve for losses and loss adjustment expenses | 3,214,854 | 45,702 | 3,260,556 | |||||||||
VIE debt | 31,164 | 242,215 | 273,379 | |||||||||
Derivative liabilities | - | 188,921 | 188,921 | |||||||||
Radian Group Inc. and Subsidiaries |
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Segment Information |
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Quarter Ended September 30, 2010 |
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Exhibit D | ||||||||||||
Mortgage | Financial | |||||||||||
(In thousands) | Insurance | Guaranty | Total | |||||||||
Revenues: | ||||||||||||
Net premiums written - insurance | $ | 174,419 | $ | 388 | $ | 174,807 | ||||||
Net premiums earned - insurance | $ | 181,731 | $ | 22,206 | $ | 203,937 | ||||||
Net investment income | 26,658 | 19,896 | 46,554 | |||||||||
Net gains on investments | 62,326 | 31,932 | 94,258 | |||||||||
Net impairment losses recognized in earnings | (34 | ) | - | (34 | ) | |||||||
Change in fair value of derivative instruments | 6,772 | 223,011 | 229,783 | |||||||||
Net gains (losses) on other financial instruments | (6,591 | ) | 11,473 | 4,882 | ||||||||
Gain on sale of affiliate | - | - | - | |||||||||
Other income | 1,870 | 81 | 1,951 | |||||||||
Total revenues | 272,732 | 308,599 | 581,331 | |||||||||
Expenses: | ||||||||||||
Provision for losses | 347,800 | (3,411 | ) | 344,389 | ||||||||
Change in reserve for premium deficiency | 8,628 | - | 8,628 | |||||||||
Policy acquisition costs | 6,444 | 4,610 | 11,054 | |||||||||
Other operating expenses | 31,690 | 11,362 | 43,052 | |||||||||
Interest expense | 3,251 | 6,251 | 9,502 | |||||||||
Total expenses | 397,813 | 18,812 | 416,625 | |||||||||
Pretax income (loss) | (125,081 | ) | 289,787 | 164,706 | ||||||||
Income tax provision (benefit) | (50,090 | ) | 102,611 | 52,521 | ||||||||
Net income (loss) | $ | (74,991 | ) | $ | 187,176 | $ | 112,185 | |||||
Cash and investments | $ | 3,722,189 | $ | 2,716,715 | $ | 6,438,904 | ||||||
Deferred policy acquisition costs | 37,144 | 109,331 | 146,475 | |||||||||
Total assets | 5,293,768 | 3,257,829 | 8,551,597 | |||||||||
Unearned premiums | 199,764 | 507,501 | 707,265 | |||||||||
Reserve for losses and loss adjustment expenses | 3,504,181 | 88,792 | 3,592,973 | |||||||||
VIE debt | 156,811 | 339,482 | 496,293 | |||||||||
Derivative liabilities | 178 | 530,510 | 530,688 | |||||||||
Radian Group Inc. and Subsidiaries |
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Segment Information |
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Nine Months Ended September 30, 2011 |
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Exhibit E | ||||||||||||
Mortgage | Financial | |||||||||||
(In thousands) | Insurance | Guaranty | Total | |||||||||
Revenues: | ||||||||||||
Net premiums written - insurance | $ | 523,255 | $ | (9,441 | ) | $ | 513,814 | |||||
Net premiums earned - insurance | $ | 513,895 | $ | 57,717 | $ | 571,612 | ||||||
Net investment income | 73,328 | 51,498 | 124,826 | |||||||||
Net gains on investments | 98,450 | 64,861 | 163,311 | |||||||||
Net impairment losses recognized in earnings | (31 | ) | - | (31 | ) | |||||||
Change in fair value of derivative instruments | 64 | 558,562 | 558,626 | |||||||||
Net gains on other financial instruments | 4,321 | 156,579 | 160,900 | |||||||||
Other income | 3,881 | 167 | 4,048 | |||||||||
Total revenues | 693,908 | 889,384 | 1,583,292 | |||||||||
Expenses: | ||||||||||||
Provision for losses | 960,564 | (20,027 | ) | 940,537 | ||||||||
Change in reserve for premium deficiency | (6,427 | ) | - | (6,427 | ) | |||||||
Policy acquisition costs | 26,651 | 13,316 | 39,967 | |||||||||
Other operating expenses | 104,132 | 33,281 | 137,413 | |||||||||
Interest expense | 11,950 | 35,247 | 47,197 | |||||||||
Total expenses | 1,096,870 | 61,817 | 1,158,687 | |||||||||
Equity in net income of affiliates | - | 65 | 65 | |||||||||
Pretax income (loss) | (402,962 | ) | 827,632 | 424,670 | ||||||||
Income tax provision (benefit) | (27,158 | ) | 28,139 | 981 | ||||||||
Net income (loss) | $ | (375,804 | ) | $ | 799,493 | $ | 423,689 | |||||
Radian Group Inc. and Subsidiaries |
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Segment Information |
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Nine Months Ended September 30, 2010 |
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Exhibit F | |||||||||||||||
Mortgage | Financial | Financial | |||||||||||||
(In thousands) | Insurance | Guaranty | Services | Total | |||||||||||
Revenues: | |||||||||||||||
Net premiums written - insurance | $ | 499,360 | $ | (9,151 | ) | $ | - | $ | 490,209 | ||||||
Net premiums earned - insurance | $ | 539,062 | 66,589 | $ | - | $ | 605,651 | ||||||||
Net investment income | 81,561 | 58,970 | - | 140,531 | |||||||||||
Net gains on investments | 125,548 | 83,920 | - | 209,468 | |||||||||||
Net impairment losses recognized in earnings | (90 | ) | - | - | (90 | ) | |||||||||
Change in fair value of derivative instruments | 5,739 | (378,516 | ) | - | (372,777 | ) | |||||||||
Net losses on other financial instruments | (44,764 | ) | (115,118 | ) | - | (159,882 | ) | ||||||||
Gain on sale of affiliate | - | - | 34,815 | 34,815 | |||||||||||
Other income | 5,292 | 299 | 63 | 5,654 | |||||||||||
Total revenues | 712,348 | (283,856 | ) | 34,878 | 463,370 | ||||||||||
Expenses: | |||||||||||||||
Provision for losses | 1,304,513 | 18,922 | - | 1,323,435 | |||||||||||
Change in reserve for premium deficiency | 43 | - | - | 43 | |||||||||||
Policy acquisition costs | 29,061 | 13,658 | - | 42,719 | |||||||||||
Other operating expenses | 103,562 | 39,511 | 200 | 143,273 | |||||||||||
Interest expense | 6,920 | 21,631 | - | 28,551 | |||||||||||
Total expenses | 1,444,099 | 93,722 | 200 | 1,538,021 | |||||||||||
Equity in net income of affiliates | - | 78 | 14,590 | 14,668 | |||||||||||
Pretax (loss) income | (731,751 | ) | (377,500 | ) | 49,268 | (1,059,983 | ) | ||||||||
Income tax (benefit) provision | (267,700 | ) | (136,278 | ) | 17,245 | (386,733 | ) | ||||||||
Net (loss) income | $ | (464,051 | ) | $ | (241,222 | ) | $ | 32,023 | $ | (673,250 | ) | ||||
Radian Group Inc. |
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Financial Guaranty Supplemental Information |
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Exhibit G | |||||||||||||||
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Quarter Ended | Nine Months Ended | |||||||||||||
(In thousands) | September 30 | September 30 | |||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Net Premiums Earned: | |||||||||||||||
Public finance direct | $ | 9,708 | $ | 12,603 | $ | 29,124 | $ | 40,836 | |||||||
Public finance reinsurance | 5,238 | 7,826 | 21,304 | 20,935 | |||||||||||
Structured direct | 399 | 895 | 1,781 | 2,055 | |||||||||||
Structured reinsurance | 875 | 882 | 2,639 | 2,729 | |||||||||||
Trade credit reinsurance | (1 | ) | - | 40 | 51 | ||||||||||
Net Premiums Earned - insurance | 16,219 | 22,206 | 54,888 | 66,606 | |||||||||||
Impact of commutations | - | - | 2,829 | (17 | ) | ||||||||||
Total Net Premiums Earned - insurance | $ | 16,219 | $ | 22,206 | $ | 57,717 | $ | 66,589 | |||||||
Refundings included in earned premium | $ | 4,597 | $ | 8,602 | $ | 18,728 | $ | 28,340 | |||||||
Net premiums earned - derivatives (1) | $ | 10,343 | $ | 11,335 | $ | 31,699 | $ | 35,172 | |||||||
Claims paid: | |||||||||||||||
Trade credit reinsurance | $ | 82 | $ | (6 | ) | $ | 343 | $ | 1,078 | ||||||
Financial Guaranty | 2,257 | 32,298 | 5,692 | 57,496 | |||||||||||
Total | $ | 2,339 | $ | 32,292 | $ | 6,035 | $ | 58,574 | |||||||
(1) Included in change in fair value of derivative instruments. | |||||||||||||||
Radian Group Inc. |
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Financial Guaranty Supplemental Information |
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Exhibit H | |||||||||
($ in thousands, except ratios) | September 30 | December 31 | September 30 | ||||||
2011 | 2010 | 2010 | |||||||
Statutory Information: | |||||||||
Capital and surplus | $ | 1,038,290 | $ | 1,049,664 | $ | 1,056,140 | |||
Contingency reserve | 431,715 | 392,589 | 374,944 | ||||||
Qualified statutory capital | 1,470,005 | 1,442,253 | 1,431,084 | ||||||
Unearned premium reserve | 469,956 | 517,516 | 534,356 | ||||||
Loss and loss expense reserve | 13,026 | 70,129 | 76,936 | ||||||
Total statutory policyholders' reserves | 1,952,987 | 2,029,898 | 2,042,376 | ||||||
Present value of installment premiums | 162,766 | 202,386 | 217,341 | ||||||
Soft capital facilities | - | - | 150,000 | ||||||
Total statutory claims paying resources | $ | 2,115,753 | $ | 2,232,284 | $ | 2,409,717 | |||
Net debt service outstanding | $ | 91,717,192 | $ | 101,168,759 | $ | 100,702,721 | |||
Capital leverage ratio (1) | 62 | 70 | 70 | ||||||
Claims paying leverage ratio (2) | 43 | 45 | 42 | ||||||
Net par outstanding by product: | |||||||||
Public finance direct | $ | 14,530,364 | $ | 15,727,252 | $ | 16,312,594 | |||
Public finance reinsurance | 19,789,862 | 21,907,290 | 22,030,001 | ||||||
Structured direct | 35,939,194 | 39,315,801 | 39,680,382 | ||||||
Structured reinsurance | 1,630,317 | 1,805,295 | 1,854,456 | ||||||
Total (3) | $ | 71,889,737 | $ | 78,755,638 | $ | 79,877,433 | |||
(1) The capital leverage ratio is derived by dividing net debt service outstanding by qualified statutory capital. |
(2) The claims paying leverage ratio is derived by dividing net debt service outstanding by total statutory claims paying resources. |
(3) Included in public finance net par outstanding is $1.6 billion, $1.9 billion and $1.8 billion at September 30, 2011, December 31, 2010 and September 30, 2010, respectively, for legally defeased bond issues where our financial guaranty policy has not been extinguished but cash or securities have been deposited in an escrow account for the benefit of bondholders. |
Radian Group Inc. |
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Mortgage Insurance Supplemental Information |
||||||||||||||||||||||||||||
Exhibit I | ||||||||||||||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||
($ in millions) | September 30 | September 30 | ||||||||||||||||||||||||||
2011 | % | 2010 | % | 2011 | % | 2010 | % | |||||||||||||||||||||
Primary new insurance written |
||||||||||||||||||||||||||||
Prime | $ | 4,104 | 99.9 | % | $ | 3,225 | 100.0 | % | $ | 8,967 | 99.9 | % | $ | 7,774 | 100.0 | % | ||||||||||||
A minus and below | 3 | 0.1 | % | 1 | - | 6 | 0.1 | % | 3 | - | ||||||||||||||||||
Total Flow | $ | 4,107 | 100.0 | % | $ | 3,226 | 100.0 | % | $ | 8,973 | 100.0 | % | $ | 7,777 | 100.0 | % | ||||||||||||
Total primary new insurance written by FICO score |
||||||||||||||||||||||||||||
>=740 | $ | 3,164 | 77.0 | % | $ | 2,621 | 81.2 | % | $ | 7,091 | 79.0 | % | $ | 6,182 | 79.5 | % | ||||||||||||
680-739 |
892 | 21.7 | % | 605 | 18.8 | % | 1,828 | 20.4 | % | 1,592 | 20.5 | % | ||||||||||||||||
620-679 |
51 | 1.3 | % | - | - | 54 | 0.6 | % | 3 | - | ||||||||||||||||||
Total Flow | $ | 4,107 | 100.0 | % | $ | 3,226 | 100.0 | % | $ | 8,973 | 100.0 | % | $ | 7,777 | 100.0 | % | ||||||||||||
Percentage of primary new insurance written |
||||||||||||||||||||||||||||
Refinances | 28 | % | 44 | % | 34 | % | 34 | % | ||||||||||||||||||||
LTV | ||||||||||||||||||||||||||||
95.01% and above | 2.2 | % | 0.2 | % | 1.7 | % | 0.3 | % | ||||||||||||||||||||
90.01% to 95.00% | 38.0 | % | 29.6 | % | 35.3 | % | 29.4 | % | ||||||||||||||||||||
ARMs | ||||||||||||||||||||||||||||
Less than 5 years | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | ||||||||||||||||||||
5 years and longer | 6.0 | % | 5.3 | % | 5.9 | % | 5.8 | % | ||||||||||||||||||||
Radian Group Inc. |
||||||||||||||
Mortgage Insurance Supplemental Information |
||||||||||||||
Exhibit J | ||||||||||||||
($ in millions) | September 30 | September 30 | ||||||||||||
2011 | % | 2010 | % | |||||||||||
Primary insurance in force |
||||||||||||||
Flow | $ | 111,493 | 89.5 | % | $ | 116,971 | 88.9 | % | ||||||
Structured | 13,143 | 10.5 | % | 14,587 | 11.1 | % | ||||||||
Total Primary | $ | 124,636 | 100.0 | % | $ | 131,558 | 100.0 | % | ||||||
Prime | $ | 104,185 | 83.6 | % | $ | 107,469 | 81.7 | % | ||||||
Alt-A | 12,775 | 10.2 | % | 15,204 | 11.6 | % | ||||||||
A minus and below | 7,676 | 6.2 | % | 8,885 | 6.7 | % | ||||||||
Total Primary | $ | 124,636 | 100.0 | % | $ | 131,558 | 100.0 | % | ||||||
Primary risk in force |
||||||||||||||
Flow | ||||||||||||||
Prime | $ | 23,813 | 86.7 | % | $ | 24,413 | 84.8 | % | ||||||
Alt-A | 2,275 | 8.3 | % | 2,743 | 9.5 | % | ||||||||
A minus and below | 1,385 | 5.0 | % | 1,634 | 5.7 | % | ||||||||
Total Flow | $ | 27,473 | 100.0 | % | $ | 28,790 | 100.0 | % | ||||||
Structured | ||||||||||||||
Prime | $ | 1,651 | 58.4 | % | $ | 1,865 | 58.7 | % | ||||||
Alt-A | 641 | 22.7 | % | 727 | 22.9 | % | ||||||||
A minus and below | 533 | 18.9 | % | 587 | 18.4 | % | ||||||||
Total Structured | $ | 2,825 | 100.0 | % | $ | 3,179 | 100.0 | % | ||||||
Total | ||||||||||||||
Prime | $ | 25,464 | 84.1 | % | $ | 26,278 | 82.2 | % | ||||||
Alt-A | 2,916 | 9.6 | % | 3,470 | 10.9 | % | ||||||||
A minus and below | 1,918 | 6.3 | % | 2,221 | 6.9 | % | ||||||||
Total Primary | $ | 30,298 | 100.0 | % | $ | 31,969 | 100.0 | % | ||||||
Total primary risk in force by FICO score |
||||||||||||||
Flow | ||||||||||||||
>=740 | $ | 11,566 | 42.1 | % | $ | 10,865 | 37.7 | % | ||||||
680-739 |
9,213 | 33.5 | % | 10,109 | 35.1 | % | ||||||||
620-679 |
5,671 | 20.7 | % | 6,620 | 23.0 | % | ||||||||
<=619 | 1,023 | 3.7 | % | 1,196 | 4.2 | % | ||||||||
Total Flow | $ | 27,473 | 100.0 | % | $ | 28,790 | 100.0 | % | ||||||
Structured | ||||||||||||||
>=740 | $ | 752 | 26.6 | % | $ | 869 | 27.3 | % | ||||||
680-739 |
822 | 29.1 | % | 927 | 29.2 | % | ||||||||
620-679 |
756 | 26.8 | % | 840 | 26.4 | % | ||||||||
<=619 | 495 | 17.5 | % | 543 | 17.1 | % | ||||||||
Total Structured | $ | 2,825 | 100.0 | % | $ | 3,179 | 100.0 | % | ||||||
Total | ||||||||||||||
>=740 | $ | 12,318 | 40.7 | % | $ | 11,734 | 36.7 | % | ||||||
680-739 |
10,035 | 33.1 | % | 11,036 | 34.6 | % | ||||||||
620-679 |
6,427 | 21.2 | % | 7,460 | 23.3 | % | ||||||||
<=619 | 1,518 | 5.0 | % | 1,739 | 5.4 | % | ||||||||
Total Primary | $ | 30,298 | 100.0 | % | $ | 31,969 | 100.0 | % | ||||||
Percentage of primary risk in force |
||||||||||||||
Refinances | 31 | % | 31 | % | ||||||||||
LTV | ||||||||||||||
95.01% and above | 18 | % | 20 | % | ||||||||||
90.01% to 95.00% | 34 | % | 33 | % | ||||||||||
ARMs | ||||||||||||||
Less than 5 years | 5 | % | 6 | % | ||||||||||
5 years and longer | 7 | % | 8 | % | ||||||||||
Pool risk in force |
||||||||||||||
Prime | $ | 1,652 | 76.6 | % | $ | 1,848 | 74.2 | % | ||||||
Alt-A | 126 | 5.9 | % | 170 | 6.8 | % | ||||||||
A minus and below | 378 | 17.5 | % | 472 | 19.0 | % | ||||||||
Total | $ | 2,156 | 100.0 | % | $ | 2,490 | 100.0 | % | ||||||
Radian Group Inc. |
||||||||||||
Mortgage Insurance Supplemental Information |
||||||||||||
Exhibit K | ||||||||||||
($ in millions) | September 30 | September 30 | ||||||||||
2011 | % | 2010 | % | |||||||||
Total primary risk in force by LTV |
||||||||||||
85.00% and below | $ | 2,731 | 9.0 | % | $ | 2,831 | 8.9 | % | ||||
85.01% to 90.00% | 11,717 | 38.7 | % | 12,239 | 38.3 | % | ||||||
90.01% to 95.00% | 10,390 | 34.3 | % | 10,619 | 33.2 | % | ||||||
95.01% and above | 5,460 | 18.0 | % | 6,280 | 19.6 | % | ||||||
Total | $ | 30,298 | 100.0 | % | $ | 31,969 | 100.0 | % | ||||
|
||||||||||||
Total primary risk in force by policy year |
||||||||||||
2005 and prior |
$ | 7,207 | 23.8 | % | $ | 8,539 | 26.6 | % | ||||
2006 |
3,276 | 10.8 | % | 3,852 | 12.0 | % | ||||||
2007 |
7,175 | 23.7 | % | 8,395 | 26.3 | % | ||||||
2008 |
5,376 | 17.7 | % | 6,189 | 19.4 | % | ||||||
2009 |
2,812 | 9.3 | % | 3,249 | 10.2 | % | ||||||
2010 |
2,354 | 7.8 | % | 1,745 | 5.5 | % | ||||||
2011 |
2,098 | 6.9 | % | - | - | |||||||
Total | $ | 30,298 | 100.0 | % | $ | 31,969 | 100.0 | % | ||||
Total pool risk in force by policy year |
||||||||||||
2005 and prior | $ | 1,877 | 87.1 | % | $ | 2,053 | 82.4 | % | ||||
2006 |
113 | 5.2 | % | 191 | 7.7 | % | ||||||
2007 |
134 | 6.2 | % | 198 | 8.0 | % | ||||||
2008 |
32 | 1.5 | % | 48 | 1.9 | % | ||||||
Total pool risk in force | $ | 2,156 | 100.0 | % | $ | 2,490 | 100.0 | % | ||||
Other risk in force |
||||||||||||
Second-lien | ||||||||||||
1st loss | $ | 107 | $ | 133 | ||||||||
2nd loss | 31 | 71 | ||||||||||
NIMs | 38 | 157 | ||||||||||
International | ||||||||||||
1st loss-Hong Kong primary mortgage insurance | 72 | 153 | ||||||||||
Credit default swaps | - | 121 | ||||||||||
Total other risk in force | $ | 248 | $ | 635 | ||||||||
Risk to capital ratio-Radian Guaranty only |
21.4:1 |
(1) | 17.2:1 | |||||||||
(1) Preliminary | ||||||||||||
Radian Group Inc. |
||||||||||||||||
Mortgage Insurance Supplemental Information |
||||||||||||||||
For the Quarter and Nine Months Ended and as of September 30, 2011 |
||||||||||||||||
Exhibit L | ||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||
($ in thousands) | September 30 | September 30 | ||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net claims paid | ||||||||||||||||
Prime | $ | 180,523 | $ | 175,809 | $ | 644,738 | $ | 465,816 | ||||||||
Alt-A | 57,244 | 80,371 | 220,514 | 226,432 | ||||||||||||
A minus and below | 37,015 | 44,456 | 134,394 | 129,485 | ||||||||||||
Total primary claims paid | 274,782 | 300,636 | 999,646 | 821,733 | ||||||||||||
Pool | 52,771 | 46,313 | 145,470 | 116,785 | ||||||||||||
Second-lien and other | 2,342 | 4,513 | 8,961 | 16,986 | ||||||||||||
Subtotal | 329,895 | 351,462 | 1,154,077 | 955,504 | ||||||||||||
Impact of first-lien terminations | - | 142,750 | 38,198 | 223,099 | ||||||||||||
Impact of captive terminations | - | (22 | ) | (1,166 | ) | (649 | ) | |||||||||
Impact of second-lien terminations | - | - | 16,550 | 10,834 | ||||||||||||
Total net claims paid | $ | 329,895 | $ | 494,190 | $ | 1,207,659 | $ | 1,188,788 | ||||||||
Average net claim paid (1) | ||||||||||||||||
Prime | $ | 51.3 | $ | 41.5 | $ | 49.6 | $ | 43.6 | ||||||||
Alt-A | 61.8 | 54.3 | 61.1 | 56.7 | ||||||||||||
A minus and below | 43.1 | 35.0 | 40.1 | 37.0 | ||||||||||||
Total average net primary claim paid | 51.8 | 43.0 | 50.1 | 45.2 | ||||||||||||
Pool | 79.8 | 77.3 | 77.1 | 72.6 | ||||||||||||
Second-lien and other | 25.7 | 43.0 | 28.0 | 35.9 | ||||||||||||
Total average net claim paid | $ | 54.4 | $ | 45.7 | $ | 52.1 | $ | 47.1 | ||||||||
Average direct primary claim paid (2) (3) | $ | 55.8 | $ | 51.8 | $ | 55.1 | $ | 52.9 | ||||||||
Average total direct claim paid (2) (3) | $ | 57.9 | $ | 53.7 | $ | 56.5 | $ | 54.0 | ||||||||
Loss ratio - GAAP Basis | 169.2 | % | 191.4 | % | 186.9 | % | 242.0 | % | ||||||||
Expense ratio - GAAP Basis | 26.9 | % | 21.0 | % | 25.4 | % | 24.6 | % | ||||||||
196.1 | % | 212.4 | % | 212.3 | % | 266.6 | % | |||||||||
Reserve for losses by category | ||||||||||||||||
Prime | $ | 1,655,992 | $ | 1,394,997 | ||||||||||||
Alt-A | 622,568 | 615,279 | ||||||||||||||
A minus and below | 368,034 | 391,945 | ||||||||||||||
Reinsurance recoverable (4) | 160,233 | 559,562 | ||||||||||||||
Total primary reserves | 2,806,827 | 2,961,783 | ||||||||||||||
Pool insurance | 397,919 | 523,833 | ||||||||||||||
Total 1st lien reserves | 3,204,746 | 3,485,616 | ||||||||||||||
Second-lien | 10,074 | 18,468 | ||||||||||||||
Other | 34 | 97 | ||||||||||||||
Total reserves | $ | 3,214,854 | $ | 3,504,181 | ||||||||||||
1st lien reserve per default (5) | ||||||||||||||||
Primary reserve per primary default | $ | 25,346 | $ | 22,780 | ||||||||||||
Pool reserve per pool default (6) | 15,325 | 16,456 | ||||||||||||||
Total 1st lien reserve per default | 23,443 | 21,536 | ||||||||||||||
(1) |
Calculated net of reinsurance recoveries. |
|
(2) |
Calculated without giving effect to the impact of terminations of captive reinsurance transactions and first- and second-lien transactions. |
|
(3) |
Before reinsurance recoveries. |
|
(4) |
Represents ceded losses on captive transactions and Smart Home. |
|
(5) |
Calculated as total reserves divided by total defaults. |
|
(6) |
If calculated before giving effect to deductibles and stop losses in pool transactions, the pool reserve per default at September 30, 2011 and September 30, 2010 would be $26,513 and $26,627 respectively.
|
|
Radian Group Inc. |
|||||||||
Mortgage Insurance Supplemental Information |
|||||||||
Exhibit M | |||||||||
September 30 | December 31 | September 30 | |||||||
2011 | 2010 | 2010 | |||||||
Default Statistics |
|||||||||
Primary insurance: | |||||||||
Flow | |||||||||
Prime |
|||||||||
Number of insured loans | 563,226 | 584,213 | 592,120 | ||||||
Number of loans in default | 64,426 | 71,196 | 73,523 | ||||||
Percentage of loans in default | 11.44 | % | 12.19 | % | 12.42 | % | |||
Alt-A |
|||||||||
Number of insured loans | 45,818 | 51,765 | 54,089 | ||||||
Number of loans in default | 14,832 | 17,934 | 19,116 | ||||||
Percentage of loans in default | 32.37 | % | 34.65 | % | 35.34 | % | |||
A minus and below |
|||||||||
Number of insured loans | 42,246 | 47,044 | 48,929 | ||||||
Number of loans in default | 13,749 | 16,401 | 17,248 | ||||||
Percentage of loans in default | 32.55 | % | 34.86 | % | 35.25 | % | |||
Total Flow | |||||||||
Number of insured loans | 651,290 | 683,022 | 695,138 | ||||||
Number of loans in default | 93,007 | 105,531 | 109,887 | ||||||
Percentage of loans in default | 14.28 | % | 15.45 | % | 15.81 | % | |||
Structured | |||||||||
Prime |
|||||||||
Number of insured loans | 42,249 | 42,131 | 43,856 | ||||||
Number of loans in default | 6,229 | 6,735 | 6,627 | ||||||
Percentage of loans in default | 14.74 | % | 15.99 | % | 15.11 | % | |||
Alt-A |
|||||||||
Number of insured loans | 18,990 | 20,234 | 20,879 | ||||||
Number of loans in default | 5,745 | 6,635 | 6,905 | ||||||
Percentage of loans in default | 30.25 | % | 32.79 | % | 33.07 | % | |||
A minus and below |
|||||||||
Number of insured loans | 15,807 | 16,716 | 17,146 | ||||||
Number of loans in default | 5,759 | 6,569 | 6,630 | ||||||
Percentage of loans in default | 36.43 | % | 39.30 | % | 38.67 | % | |||
Total Structured | |||||||||
Number of insured loans | 77,046 | 79,081 | 81,881 | ||||||
Number of loans in default | 17,733 | 19,939 | 20,162 | ||||||
Percentage of loans in default | 23.02 | % | 25.21 | % | 24.62 | % | |||
Total Primary Insurance | |||||||||
Prime |
|||||||||
Number of insured loans | 605,475 | 626,344 | 635,976 | ||||||
Number of loans in default | 70,655 | 77,931 | 80,150 | ||||||
Percentage of loans in default | 11.67 | % | 12.44 | % | 12.60 | % | |||
Alt-A |
|||||||||
Number of insured loans | 64,808 | 71,999 | 74,968 | ||||||
Number of loans in default | 20,577 | 24,569 | 26,021 | ||||||
Percentage of loans in default | 31.75 | % | 34.12 | % | 34.71 | % | |||
A minus and below |
|||||||||
Number of insured loans | 58,053 | 63,760 | 66,075 | ||||||
Number of loans in default | 19,508 | 22,970 | 23,878 | ||||||
Percentage of loans in default | 33.60 | % | 36.03 | % | 36.14 | % | |||
Total Primary Insurance | |||||||||
Number of insured loans | 728,336 | 762,103 | 777,019 | ||||||
Number of loans in default | 110,740 | 125,470 | 130,049 | ||||||
Percentage of loans in default | 15.20 | % | 16.46 | % | 16.74 | % | |||
Pool insurance: | |||||||||
Number of loans in default | 25,966 | 32,456 | 31,832 | ||||||
Radian Group Inc. |
||||||||||||||||
Mortgage Insurance Supplemental Information |
||||||||||||||||
For the Quarter and Nine Months Ended and as of September 30, 2011 |
||||||||||||||||
Exhibit N | ||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||
September 30 | September 30 | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net Premiums Written (In thousands) |
||||||||||||||||
Primary and Pool Insurance | $ | 177,642 | $ | 173,805 | $ | 521,455 | $ | 498,468 | ||||||||
Second-lien (1) | 565 | 609 | 1,777 | 888 | ||||||||||||
International | 8 | 5 | 23 | 4 | ||||||||||||
Total Net Premiums Written - Insurance | $ | 178,215 | $ | 174,419 | $ | 523,255 | $ | 499,360 | ||||||||
Net Premiums Earned (In thousands) |
||||||||||||||||
Primary and Pool Insurance | $ | 161,779 | $ | 178,554 | $ | 507,636 | $ | 529,288 | ||||||||
Second-lien | 565 | 610 | 1,777 | 1,855 | ||||||||||||
International | 1,092 | 2,567 | 4,482 | 7,919 | ||||||||||||
Total Net Premiums Earned - Insurance | $ | 163,436 | $ | 181,731 | $ | 513,895 | $ | 539,062 | ||||||||
Net premiums earned - derivatives (In thousands) (2) | $ | - | $ | 137 | $ | - | $ | 416 | ||||||||
1st Lien Captives |
||||||||||||||||
Premiums ceded to captives (In thousands) | $ | 7,068 | $ | 24,392 | $ | 21,921 | $ | 74,550 | ||||||||
% of total premiums | 4.1 | % | 11.9 | % | 4.1 | % | 12.2 | % | ||||||||
NIW subject to captives (In thousands) | $ | - | $ | - | $ | - | $ | 129 | ||||||||
% of primary NIW | - | - | - | <1% | ||||||||||||
IIF included in captives (3) | 9.5 | % | 28.9 | % | ||||||||||||
RIF included in captives (3) | 9.3 | % | 30.0 | % | ||||||||||||
Persistency (twelve months ended September 30) | 85.0 | % | 78.9 | % | ||||||||||||
(1) |
Reflects the impact of second-lien terminations. |
|
(2) |
Included in change in fair value of derivative instruments. |
|
(3) |
Radian reinsures the middle layer risk positions, while retaining a significant portion of the total risk comprising the first loss and most remote risk positions. |
|
Radian Group Inc. |
||||||||||||
Mortgage Insurance Supplemental Information |
||||||||||||
Modified Pool (1) |
||||||||||||
Exhibit O | ||||||||||||
($ in millions) | September 30 | September 30 | ||||||||||
2011 | % | 2010 | % | |||||||||
Modified pool risk in force by policy year |
||||||||||||
2005 and prior | $ | 197 | 71.1 | % | $ | 190 | 63.8 | % | ||||
2006 |
32 | 11.6 | % | 43 | 14.4 | % | ||||||
2007 |
41 | 14.8 | % | 58 | 19.5 | % | ||||||
2008 |
7 | 2.5 | % | 7 | 2.3 | % | ||||||
Total | $ | 277 | 100.0 | % | $ | 298 | 100.0 | % | ||||
Modified pool risk in force by product |
||||||||||||
Prime | $ | 82 | 29.6 | % | $ | 75 | 25.2 | % | ||||
Alt-A | 177 | 63.9 | % | 205 | 68.8 | % | ||||||
A minus and below | 18 | 6.5 | % | 18 | 6.0 | % | ||||||
Total | $ | 277 | 100.0 | % | $ | 298 | 100.0 | % | ||||
Modified pool insurance in force by product |
||||||||||||
Prime | $ | 964 | 31.2 | % | $ | 696 | 22.1 | % | ||||
Alt-A | 1,973 | 64.0 | % | 2,310 | 73.3 | % | ||||||
A minus and below | 147 | 4.8 | % | 147 | 4.6 | % | ||||||
Total | $ | 3,084 | 100.0 | % | $ | 3,153 | 100.0 | % | ||||
Reserve for losses - modified pool (in thousands) | $ | 67,601 | $ | 89,336 | ||||||||
Default Statistics: |
||||||||||||
Modified pool: | ||||||||||||
Total modified pool |
||||||||||||
Number of insured loans | 18,034 | 15,988 | ||||||||||
Number of loans in default | 3,595 | 4,081 | ||||||||||
Percentage of loans in default | 19.93 | % | 25.53 | % | ||||||||
(1) Included in primary insurance amounts. | ||||||||||||
FORWARD-LOOKING STATEMENTS
All statements in this press release that address events, developments or results that we expect or anticipate may occur in the future are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the United States (“U.S.”) Private Securities Litigation Reform Act of 1995. In most cases, forward-looking statements may be identified by words such as “anticipate,” “may,” “will,” “could,” “should,” “would,” “expect,” “intend,” “plan,” “goal,” “contemplate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” or the negative or other variations on these words and other similar expressions. These statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management’s current views and assumptions with respect to future events. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking information. The forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements, including:
Under state insurance regulations, mortgage insurers are required to
maintain minimum surplus levels and, in certain states, a minimum amount
of statutory capital relative to the level of risk in force, or
“risk-to-capital.” Sixteen states (the risk-based capital or “RBC
States”) currently have a statutory or regulatory risk-based capital
requirement (a “Statutory RBC Requirement”), the most common of which
(imposed by 11 of the RBC States) is a requirement that a mortgage
insurer’s risk-to-capital ratio may not exceed 25 to 1. Radian
Guaranty’s domiciliary state, Pennsylvania, is not one of the RBC
States. In the first nine months of 2011, the RBC States accounted for
approximately 53.5% of Radian Guaranty’s total primary new insurance
written. If Radian Guaranty is not in compliance with the applicable
Statutory RBC Requirement in any RBC State, it would be prohibited from
writing new business in that state until it is back in compliance or it
receives a waiver of the requirement from the applicable state insurance
regulator, as discussed in more detail below. In those states that do
not have a Statutory RBC Requirement, it is not clear what actions the
applicable state regulators would take if a mortgage insurer fails to
meet the Statutory RBC Requirement established by another state.
Accordingly, if Radian Guaranty fails to meet the Statutory RBC
Requirement in one or more states, it could be required to suspend
writing business in some or all of the states in which it does business.
In addition, the GSEs and our mortgage lending customers may decide not
to conduct new business with Radian Guaranty (or reduce current business
levels) or impose restrictions on Radian Guaranty while its
risk-to-capital ratio remained at elevated levels. The franchise value
of our mortgage insurance business would likely be significantly
diminished if Radian Guaranty was prohibited from writing new business
or restricted in the amount of new business it could write in one or
more states.
As a result of the significant losses we experienced
in our mortgage insurance business during the last four years and
despite significant capital contributions to this business, Radian
Guaranty’s risk-to-capital ratio has increased from 8.1 to 1 at
December 31, 2006 to an estimated 21.4 to 1 at September 30, 2011. Based
on our current projections, which are based on various assumptions that
are subject to inherent uncertainty and require judgment by management,
Radian Guaranty’s risk-to-capital ratio is expected to continue to
increase and, absent any future capital contributions from our holding
company, exceed 25 to 1 in the near term. The ultimate amount of losses
and the timing of these losses will depend in part on general economic
conditions and other factors, including the health of credit markets,
home prices and unemployment rates, all of which are difficult to
predict and beyond our control. In addition, establishing loss reserves
in our businesses requires significant judgment by management with
respect to the likelihood, magnitude and timing of anticipated losses.
This judgment has been made more difficult in the current period of
prolonged economic uncertainly, and the models and estimates we use to
establish loss reserves may prove to be inaccurate. If the actual losses
we ultimately realize are in excess of the loss estimates we use in
establishing loss reserves, we may be required to take unexpected
charges to income, which could hurt our capital position and increase
Radian Guaranty’s risk-to-capital position.
Radian Guaranty’s risk-to-capital position also is dependent on the
performance of our financial guaranty portfolio. During the third
quarter of 2008, we contributed our ownership interest in Radian Asset
Assurance to Radian Guaranty. While this reorganization provided Radian
Guaranty with substantial regulatory capital and dividends, it also
makes the capital adequacy of our mortgage insurance business dependent,
to a significant degree, on the performance of our financial guaranty
business. If the performance of our financial guaranty portfolio
deteriorates materially, including if we are required to establish one
or more significant statutory reserves as a result of defaults on
obligations that we insure, or if we make net commutation payments to
terminate insured obligations in excess of the then posted statutory
reserves for such obligations, the regulatory capital of Radian Guaranty
also would be negatively impacted. Any decrease in the capital support
derived from our financial guaranty business could, therefore, increase
the risk-to-capital ratio of Radian Guaranty and negatively impact its
ability to remain in compliance with the Statutory RBC Requirements.
We
actively manage Radian Guaranty’s risk-to-capital position in various
ways, including: (1) through reinsurance arrangements with our
subsidiaries, (2) by seeking opportunities to reduce our risk exposure
through commutations or other negotiated transactions, and (3) by
contributing additional capital from our holding company to our mortgage
insurance operations. Our holding company currently has unrestricted
cash and liquid investments of approximately $600 million, which may be
used to further support Radian Guaranty's risk-to-capital position.
Depending on the extent of our future losses, the amount of capital
contributions required for Radian Guaranty to remain in compliance with
the Statutory RBC Requirements could be substantial and could exceed
amounts maintained at our holding company.
Our ability to
continue to manage Radian Guaranty’s risk-to-capital through reinsurance
may be limited. Our existing inter-company reinsurance arrangements are
conducted through affiliated insurance subsidiaries, and therefore,
remain subject to regulation by state insurance regulators who could
decide to limit, or require the termination of, such arrangements. In
addition, certain of these affiliated reinsurance companies currently
are operating at or near minimal capital levels and have required, and
may continue to require, additional capital contributions from our
holding company in the future. One of these affiliated insurance
companies, which provides reinsurance to Radian Guaranty for coverage on
loans in excess of 25%, is a sister company of Radian Guaranty, and
therefore, most of any contributions to this insurer would not be
consolidated with Radian Guaranty’s capital for purposes of calculating
Radian Guaranty’s risk-to-capital position. In the recent past, Fannie
Mae has proposed amendments to its mortgage insurance eligibility
guidelines which, if implemented without revision or a waiver for
existing arrangements, may prohibit the use of certain of our
inter-company reinsurance arrangements. If we are limited in, or
prohibited from, using inter-company reinsurance arrangements to manage
Radian Guaranty’s risk-to-capital level, it would adversely impact
Radian Guaranty’s risk-to-capital position.
In order to maximize our financial flexibility, we have applied for
waivers or similar relief for Radian Guaranty in each of the RBC States.
For the past several years, we, along with others in our industry, have
pursued regulatory changes or relief in the RBC States, primarily
through new legislation or other means by which the insurance regulator
in these states is granted discretionary authority to waive the
Statutory RBC Requirement. As a result of these efforts, we now believe
that all of the RBC States other than New York have the flexibility to
permit a waiver of their Statutory RBC Requirements. To date, Radian
Guaranty has been granted future relief from two states – Illinois has
granted a waiver that expires December 31, 2012 and Kentucky has
informed us that it would not take action in the event Radian Guaranty’s
risk-to-capital ratio exceeded 25 to 1. The state of Kansas has not
granted waivers to any mortgage insurance companies at this time,
including Radian Guaranty. We are actively pursuing waivers in the
remaining 12 RBC States. There can be no assurance: (1) that Radian
Guaranty will be granted a waiver in any of the remaining RBC States;
(2) that if a waiver is granted, such regulator will not revoke or
terminate the waiver, which the regulator generally has the authority to
do at any time; or (3) regarding what, if any, requirements may be
imposed as a condition to such waivers, and whether we would be able to
comply with any such conditions.
In addition to filing for
waivers in the RBC States, we are also preparing our wholly-owned
subsidiary, Radian Mortgage Assurance (a sister company of Radian
Guaranty formerly named Amerin Corporation) to write new first-lien
mortgage insurance business. If necessary, we may use Radian Mortgage
Assurance to write mortgage insurance only in those states that do not
permit Radian Guaranty to continue writing insurance while it is out of
compliance with Statutory RBC Requirements. We have received approval
from the Pennsylvania Department of Insurance to use Radian Mortgage
Assurance as a first-lien mortgage insurance provider. In addition, we
intend to submit a request to the GSEs to have Radian Mortgage Assurance
approved as an eligible mortgage insurer for purposes of writing
business in each of the RBC States. As part of this submission, we
expect to commit to making an initial capital contribution of $50
million to supplement Radian Mortgage Assurance’s existing $17 million
of capital. The GSEs could require a greater level of capitalization for
Radian Mortgage Assurance and/or a capital contribution to Radian
Guaranty as a condition to their approval, any of which would limit our
financial flexibility and could make it more difficult for us to meet
our holding company obligations in the future, including future
principal payments on our long-term debt.
We cannot provide any assurance as to whether we will obtain waivers in
the remaining RBC States or whether the GSEs will approve Radian
Mortgage Assurance as an eligible mortgage insurer. As part of our
waiver requests in the remaining RBC States and our request to the GSEs,
we are required to submit financial projections for Radian Guaranty to
the various insurance departments and the GSEs, including projections
performed by an independent third party.
One of our competitors,
Republic Mortgage Insurance Company (“RMIC”), ceased writing new
insurance commitments after the waiver it received from its domiciliary
state expired on August 31, 2011; and in October 2011, RMIC went into
run-off. Another competitor, PMI Mortgage Insurance Co. (“PMI”) and the
subsidiary it established to write new business if PMI was no longer
able to do so (“PMAC”), ceased issuing new mortgage insurance
commitments effective August 2011 when PMI was placed under the
supervision of the insurance department of its domiciliary state.
Subsequently, on October 20, 2011, the Superior Court of the State of
Arizona issued an order directing the Director of the Arizona Department
of Insurance (the “Director”) to take possession and control of the
property and business of PMI pending a hearing on various matters that
include the appointment of the Director as receiver for PMI. Both Fannie
Mae and Freddie Mac suspended RMIC, PMI and PMAC as approved mortgage
insurers. We are uncertain how such events, including the actions taken
by the GSEs, will impact the status of Radian Guaranty’s waiver requests
and the GSE’s approval process for Radian Mortgage Assurance.
Our
existing capital resources may not be sufficient to successfully manage
Radian Guaranty’s risk-to-capital ratio. If permitted by the RBC States
and the GSEs, our ability to use waivers and Radian Mortgage Assurance
to allow Radian Guaranty to continue to write business with a
risk-to-capital position in excess of the Statutory RBC Requirements
will likely be subject to a maximum risk-to-capital ratio and
potentially other restrictions, which we may be unable to satisfy. As a
result, even if we are successful in implementing this strategy,
additional capital contributions could be necessary, which we may not
have the ability to provide. Further, regardless of whether the waivers
or Radian Mortgage Assurance are available to us, we may choose to use
our existing holding company capital to maintain compliance with the
Statutory RBC Requirements. Depending on the extent of our future
mortgage insurance losses along with other factors, the amount of
capital contributions that may be required to maintain compliance with
the Statutory RBC Requirements could be significant and could exceed all
of our remaining available capital. In the event we contribute a
significant amount of our holding company capital to Radian Guaranty,
our financial flexibility would be significantly reduced, making it more
difficult for us to meet our holding company obligations in the future,
including future principal payments on our long-term debt.
Other risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements including the following:
For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to the Risk Factors detailed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2010, and in Item 1A of Part II of our Quarterly Reports on Form 10-Q. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on which we filed this report. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements made in this report to reflect new information or future events or for any other reason.
CONTACT:
Radian Group Inc.
Emily Riley, 215-231-1035
emily.riley@radian.biz